Over the past few years, the growth of digital wallet apps has been phenomenal. Driven by the adoption rate of mobile apps to check last-minute deals on travel, buy movie tickets, or order food – the digital wallet companies have grown along. Early adopters of these digital wallets were often digitally-savvy millennials that swayed for features that offered lower transaction time and convenience.
The growing digital wallets market has also invited large technology companies into the financial services market either by building custom apps or by integrating them into their existing digital platforms. With more and more nations adopting the open banking framework, traditional nationalized banks are forced to open their customer data to third-party vendors who offer superior features, through their apps. Having started with payments, large technology companies in many global markets have eventually expanded into the provision of credit and insurance, either directly or in partnership with an existing financial institution.
In India, Google is pushing the adoption of Google Pay - its digital wallet into not just mobile apps but also through physical brick-and-mortar stores. Google Pay has already seen a huge rise in adoption with over 55 million users downloading the app and having clocked up more than 750 million transactions over the year.
Digital wallet apps in their constant drive to improve their value proposition and differentiation are out to build partnerships with key merchants in each market they operate in, offering discounts and loyalty points. In the United States, Apple is positioning itself as the premium digital wallet. Banks supporting Apple Pay have grown by over 4,900 in number. Amazon Pay – the digital wallet offered by Amazon is now pushing its way into brick-and-mortar stores. Amazon is also focusing on gas stations, restaurants, and other merchants that wouldn't see Amazon as a business rival, offering them lower payment-processing fees.
Large technology companies, driving these digital wallet apps are now able to gain more insight into customer purchase habits. Using their existing competence in big data analysis, they are in a perfect position to collect, analyze and segment users into smaller clusters – with lower credit risk scores for effective credit offerings and into clusters that are of potential interest to merchants, due to their transaction habits for advertising needs.
Traditional banks are waking up to the impact of growth in digital wallet adoption, where large technology companies are well poised to lead. To retain the mindshare and brand relevance, traditional nationalized banks will have to establish new partnerships, that offer more value and stay relevant to their customer habits.
References
[1].https://en.wikipedia.org/wiki/Digital_wallet
[2].https://pay.google.com/about/
[3].https://www.amazon.in/gp/sva/dashboard
[4].https://www.apple.com/apple-pay/
[5].https://www.samsung.com/in/samsung-pay/
[6].https://www.microsoft.com/en-us/payments
